109th CONGRESS
1st Session
H. R. 516
To amend the procedures that apply to consideration of interstate
class actions to assure fairer outcomes for class members and defendants,
to outlaw certain practices that provide inadequate settlements for class
members, to assure that attorneys do not receive a disproportionate amount
of settlements at the expense of class members, to assure prompt consideration
of interstate class actions, to amend title 28, United States Code, to allow
the application of the principles of Federal diversity jurisdiction to interstate
class actions, and for other purposes.
IN THE HOUSE OF REPRESENTATIVES
February 2, 2005
Mr. GOODLATTE (for himself, Mr. BOUCHER, Mr. SENSENBRENNER, Mr. SMITH of
Texas, Mr. DELAY, Mr. BLUNT, Mr. CANTOR, Ms. PRYCE of Ohio, Mr. DREIER, Mr.
MANZULLO, Mr. KINGSTON, Mr. FEENEY, Mr. COBLE, Mr. CHABOT, Mr. FORBES, Mr.
PENCE, Mr. ISSA, Mr. KELLER, Mr. BACHUS, Mr. HOSTETTLER, Mr. GALLEGLY, Mr.
DANIEL E. LUNGREN of California, Mr. FLAKE, Mr. BRADLEY of New Hampshire,
Mr. CARTER, Mr. SESSIONS, Mr. ROGERS of Michigan, Mr. KUHL of New York, Ms.
HART, Mr. NORWOOD, Mr. PEARCE, Mr. GILCHREST, Mr. CHOCOLA, Mr. HENSARLING,
Mr. BAKER, Mrs. BIGGERT, Mr. KENNEDY of Minnesota, Mr. BURGESS, Mr. GINGREY,
Mr. COX, Mr. DENT, Mr. WICKER, Mr. CANNON, Mr. CUNNINGHAM, Mr. MILLER of Florida,
Mr. FITZPATRICK of Pennsylvania, Mr. MCCRERY, Mr. STEARNS, Ms. FOXX, Mr. CONAWAY,
Mr. MORAN of Virginia, Mr. MATHESON, Mr. HOLDEN, Mr. BOYD, Mr. TANNER, Mr.
COOPER, Mr. CRAMER, Mr. SCOTT of Georgia, Mr. DAVIS of Tennessee, Mr. MOORE
of Kansas, Ms. GINNY BROWN-WAITE of Florida, and Mr. BOREN) introduced the
following bill; which was referred to the Committee on the Judiciary
A BILL
To amend the procedures that apply to consideration of interstate
class actions to assure fairer outcomes for class members and defendants,
to outlaw certain practices that provide inadequate settlements for class
members, to assure that attorneys do not receive a disproportionate amount
of settlements at the expense of class members, to assure prompt consideration
of interstate class actions, to amend title 28, United States Code, to allow
the application of the principles of Federal diversity jurisdiction to interstate
class actions, and for other purposes.
Be it enacted by the Senate and House of Representatives of the United
States of America in Congress assembled,
SECTION 1. SHORT TITLE; REFERENCE; TABLE OF CONTENTS.
(a) Short Title- This Act may be cited as the `Class Action Fairness Act of
2005'.
(b) Reference- Whenever in this Act reference is made to an amendment to,
or repeal of, a section or other provision, the reference shall be considered
to be made to a section or other provision of title 28, United States Code.
(c) Table of Contents- The table of contents for this Act is as follows:
Sec. 1. Short title; reference; table of contents.
Sec. 2. Findings and purposes.
Sec. 3. Consumer class action bill of rights and improved procedures for
interstate class actions.
Sec. 4. Federal district court jurisdiction of interstate class actions.
Sec. 5. Removal of interstate class actions to Federal district court.
Sec. 6. Appeals of class action certification orders.
SEC. 2. FINDINGS AND PURPOSES.
(a) Findings- The Congress finds as follows:
(1) Class action lawsuits are an important and valuable part of our legal
system when they permit the fair and efficient resolution of legitimate
claims of numerous parties by allowing the claims to be aggregated into
a single action against a defendant that has allegedly caused harm.
(2) For many years there have been abuses of the class action device that
have--
(A) harmed class members with legitimate claims and defendants that have
acted responsibly;
(B) adversely affected interstate commerce; and
(C) undermined public respect for the judicial system in the United States.
(3) Class members have been harmed by a number of actions taken by plaintiffs'
lawyers, which provide little or no benefit to class members as a whole,
including--
(A) plaintiffs' lawyers receiving large fees, while class members are
left with coupons or other awards of little or no value; and
(B) unjustified rewards being made to certain plaintiffs at the expense
of other class members.
(4) Through the use of artful pleading, plaintiffs are able to avoid litigating
class actions in Federal court, forcing businesses and other organizations
to defend interstate class action lawsuits in county and State courts where--
(A) the lawyers, rather than the claimants, are likely to receive the
maximum benefit;
(B) less scrutiny may be given to the merits of the case; and
(C) defendants are effectively forced into settlements, in order to avoid
the possibility of huge judgments that could destabilize their companies.
(5) These abuses undermine the Federal judicial system, the free flow of
interstate commerce, and the intent of the framers of the Constitution in
creating diversity jurisdiction, in that county and State courts are--
(A) handling interstate class actions that affect parties from many States;
(B) sometimes acting in ways that demonstrate bias against out-of-State
defendants; and
(C) making judgments that impose their view of the law on other States
and bind the rights of the residents of those States.
(6) Abusive interstate class actions have harmed society as a whole by forcing
innocent parties to settle cases rather than risk a huge judgment by a local
jury, thereby costing consumers billions of dollars in increased costs to
pay for forced settlements and excessive judgments.
(b) Purposes- The purposes of this Act are--
(1) to assure fair and prompt recoveries for class members with legitimate
claims;
(2) to protect responsible companies and other institutions against interstate
class actions in State courts;
(3) to restore the intent of the framers of the Constitution by providing
for Federal court consideration of interstate class actions; and
(4) to benefit society by encouraging innovation and lowering consumer prices.
SEC. 3. CONSUMER CLASS ACTION BILL OF RIGHTS AND IMPROVED PROCEDURES FOR
INTERSTATE CLASS ACTIONS.
(a) In General- Part V is amended by inserting after chapter 113 the following:
`CHAPTER 114--CLASS ACTIONS
`1711. Judicial scrutiny of coupon and other noncash settlements.
`1712. Protection against loss by class members.
`1713. Protection against discrimination based on geographic location.
`1714. Prohibition on the payment of bounties.
`Sec. 1711. Judicial scrutiny of coupon and other noncash settlements
`The court may approve a proposed settlement under which the class members
would receive noncash benefits or would otherwise be required to expend funds
in order to obtain part or all of the proposed benefits only after a hearing
to determine whether, and making a written finding that, the settlement is
fair, reasonable, and adequate for class members.
`Sec. 1712. Protection against loss by class members
`The court may approve a proposed settlement under which any class member
is obligated to pay sums to class counsel that would result in a net loss
to the class member only if the court makes a written finding that nonmonetary
benefits to the class member outweigh the monetary loss.
`Sec. 1713. Protection against discrimination based on geographic location
`The court may not approve a proposed settlement that provides for the payment
of greater sums to some class members than to others solely on the basis that
the class members to whom the greater sums are to be paid are located in closer
geographic proximity to the court.
`Sec. 1714. Prohibition on the payment of bounties
`(a) In General- The court may not approve a proposed settlement that provides
for the payment of a greater share of the award to a class representative
serving on behalf of a class, on the basis of the formula for distribution
to all other class members, than that awarded to the other class members.
`(b) Rule of Construction- The limitation in subsection (a) shall not be construed
to prohibit any payment approved by the court for reasonable time or costs
that a person was required to expend in fulfilling his or her obligations
as a class representative.
`Sec. 1715. Definitions
`(1) CLASS ACTION- The term `class action' means--
`(A) any civil action filed in a district court of the United States pursuant
to rule 23 of the Federal Rules of Civil Procedure; or
`(B) any civil action that is removed to a district court of the United
States and that was originally filed pursuant to a State statute or rule
of judicial procedure authorizing an action to be brought by one or more
representatives on behalf of a class.
`(2) CLASS COUNSEL- The term `class counsel' means the persons who serve
as the attorneys for the class members in a proposed or certified class
action.
`(3) CLASS MEMBER- The term `class member' means any of the persons who
fall within the definition of the proposed or certified class in a class
action.
`(4) PROPOSED SETTLEMENT- The term `proposed settlement' means an agreement
that resolves claims in a class action, that is subject to court approval,
and that, if approved, would be binding on the class members.'.
(b) Technical and Conforming Amendment- The table of chapters for part V is
amended by inserting after the item relating to chapter 113 the following:
--1711'.
SEC. 4. FEDERAL DISTRICT COURT JURISDICTION OF INTERSTATE CLASS ACTIONS.
(a) Application of Federal Diversity Jurisdiction- Section 1332 is amended--
(1) by redesignating subsection (d) as subsection (e); and
(2) by inserting after subsection (c) the following:
`(d)(1) In this subsection--
`(A) the term `class' means all of the class members in a class action;
`(B) the term `class action' means any civil action filed pursuant to rule
23 of the Federal Rules of Civil Procedure or similar State statute or rule
of judicial procedure authorizing an action to be brought by one or more
representative persons on behalf of a class;
`(C) the term `class certification order' means an order issued by a court
approving the treatment of a civil action as a class action; and
`(D) the term `class member' means any of the persons who fall within the
definition of the proposed or certified class in a class action.
`(2) The district courts shall have original jurisdiction of any civil action
in which the matter in controversy exceeds the sum or value of $5,000,000,
exclusive of interest and costs, and is a class action in which--
`(A) any member of a class of plaintiffs is a citizen of a State different
from any defendant;
`(B) any member of a class of plaintiffs is a foreign state or a citizen
or subject of a foreign state and any defendant is a citizen of a State;
or
`(C) any member of a class of plaintiffs is a citizen of a State and any
defendant is a foreign state or a citizen or subject of a foreign state.
`(3) A district court may, in the interests of justice, decline to exercise
jurisdiction under paragraph (2) over a class action in which greater than
one-third but less than two-thirds of the members of all proposed plaintiff
classes in the aggregate and the primary defendants are citizens of the State
in which the action was originally filed based on consideration of the following
factors:
`(A) Whether the claims asserted involve matters of national or interstate
interest.
`(B) Whether the claims asserted will be governed by laws other than those
of the State in which the action was originally filed.
`(C) In the case of a class action originally filed in a State court, whether
the class action has been pleaded in a manner that seeks to avoid Federal
jurisdiction.
`(D) Whether the number of citizens of the State in which the action was
originally filed in all proposed plaintiff classes in the aggregate is substantially
larger than the number of citizens from any other State, and the citizenship
of the other members of the proposed class is dispersed among a substantial
number of States.
`(E) Whether 1 or more class actions asserting the same or similar claims
on behalf of the same or other persons have been or may be filed.
`(4) Paragraph (2) shall not apply to any class action in which--
`(A) two-thirds or more of the members of all proposed plaintiff classes
in the aggregate and the primary defendants are citizens of the State in
which the action was originally filed;
`(B) the primary defendants are States, State officials, or other governmental
entities against whom the district court may be foreclosed from ordering
relief; or
`(C) the number of members of all proposed plaintiff classes in the aggregate
is less than 100.
`(5) In any class action, the claims of the individual class members shall
be aggregated to determine whether the matter in controversy exceeds the sum
or value of $5,000,000, exclusive of interest and costs.
`(6) This subsection shall apply to any class action before or after the entry
of a class certification order by the court with respect to that action.
`(7)(A) A district court shall dismiss any civil action that is subject to
the jurisdiction of the court solely under this subsection if the court determines
that the action may not proceed as a class action based on a failure to satisfy
the requirements of rule 23 of the Federal Rules of Civil Procedure.
`(B) Nothing in subparagraph (A) shall prohibit plaintiffs from filing an
amended class action in Federal court or filing an action in State court,
except that any such action filed in State court may be removed to the appropriate
district court if it is an action of which the district courts of the United
States have original jurisdiction.
`(C) In any action that is dismissed under this paragraph and is filed by
any of the original named plaintiffs therein in the same State court venue
in which the dismissed action was originally filed, the limitations periods
on all reasserted claims shall be deemed tolled for the period during which
the dismissed class action was pending. The limitations periods on any claims
that were asserted in a class action dismissed under this paragraph that are
subsequently asserted in an individual action shall be deemed tolled for the
period during which the dismissed action was pending.
`(8) Paragraph (2) shall not apply to any class action brought by shareholders
that solely involves a claim that relates to--
`(A) a claim concerning a covered security as defined under section 16(f)(3)
of the Securities Act of 1933 and section 28(f)(5)(E) of the Securities
Exchange Act of 1934;
`(B) the internal affairs or governance of a corporation or other form of
business enterprise and arises under or by virtue of the laws of the State
in which such corporation or business enterprise is incorporated or organized;
or
`(C) the rights, duties (including fiduciary duties), and obligations relating
to or created by or pursuant to any security (as defined under section 2(a)(1)
of the Securities Act of 1933 and the regulations issued thereunder).
`(9) For purposes of this subsection and section 1453 of this title, an unincorporated
association shall be deemed to be a citizen of the State where it has its
principal place of business and the State under whose laws it is organized.
`(10) For purposes of this section and section 1453 of this title, a civil
action that is not otherwise a class action as defined in paragraph (1)(B)
of this subsection shall nevertheless be deemed a class action if--
`(A) the named plaintiff purports to act for the interests of its members
(who are not named parties to the action) or for the interests of the general
public, seeks a remedy of damages, restitution, disgorgement, or any other
form of monetary relief, and is not a State attorney general; or
`(B) monetary relief claims in the action are proposed to be tried jointly
in any respect with the claims of 100 or more other persons on the ground
that the claims involve common questions of law or fact.
In any such case, the persons who allegedly were injured shall be treated
as members of a proposed plaintiff class and the monetary relief that is sought
shall be treated as the claims of individual class members. The provisions
of paragraph (7) of this subsection and subsections (b)(2) and (d) of section
1453 shall not apply to civil actions described under subparagraph (A). The
provisions of paragraph (7) of this subsection, and subsections (b)(2) and
(d) of section 1453 shall not apply to civil actions described under subparagraph
(B).'.
(b) Conforming Amendments-
(1) Section 1335(a)(1) is amended by inserting `(a) or (d)' after `1332'.
(2) Section 1603(b)(3) is amended by striking `(d)' and inserting `(e)'.
SEC. 5. REMOVAL OF INTERSTATE CLASS ACTIONS TO FEDERAL DISTRICT COURT.
(a) In General- Chapter 89 is amended by adding after section 1452 the following:
`Sec. 1453. Removal of class actions
`(a) Definitions- In this section, the terms `class', `class action', `class
certification order', and `class member' have the meanings given these terms
in section 1332(d)(1).
`(b) In General- A class action may be removed to a district court of the
United States in accordance with this chapter, without regard to whether any
defendant is a citizen of the State in which the action is brought, except
that such action may be removed--
`(1) by any defendant without the consent of all defendants; or
`(2) by any plaintiff class member who is not a named or representative
class member without the consent of all members of such class.
`(c) When Removable- This section shall apply to any class action before or
after the entry of a class certification order in the action, except that
a plaintiff class member who is not a named or representative class member
of the action may not seek removal of the action before an order certifying
a class of which the plaintiff is a class member has been entered.
`(d) Procedure for Removal- The provisions of section 1446 relating to a defendant
removing a case shall apply to a plaintiff removing a case under this section,
except that, in the application of subsection (b) of such section, the requirement
relating to the 30-day filing period shall be met if a plaintiff class member
files notice of removal within 30 days after receipt by such class member,
through service or otherwise, of the initial written notice of the class action.
`(e) Review of Orders Remanding Class Actions to State Courts- The provisions
of section 1447 shall apply to any removal of a case under this section, except
that, notwithstanding the provisions of section 1447(d), an order remanding
a class action to the State court from which it was removed shall be reviewable
by appeal or otherwise.
`(f) Exception- This section shall not apply to any class action brought by
shareholders that solely involves--
`(1) a claim concerning a covered security as defined under section 16(f)(3)
of the Securities Act of 1933 and section 28(f)(5)(E) of the Securities
Exchange Act of 1934;
`(2) a claim that relates to the internal affairs or governance of a corporation
or other form of business enterprise and arises under or by virtue of the
laws of the State in which such corporation or business enterprise is incorporated
or organized; or
`(3) a claim that relates to the rights, duties (including fiduciary duties),
and obligations relating to or created by or pursuant to any security (as
defined under section 2(a)(1) of the Securities Act of 1933 and the regulations
issued thereunder).'.
(b) Removal Limitation- Section 1446(b) is amended in the second sentence
by inserting `(a)' after `section 1332'.
(c) Technical and Conforming Amendments- The table of sections for chapter
89 is amended by adding after the item relating to section 1452 the following:
`1453. Removal of class actions.'.
SEC. 6. APPEALS OF CLASS ACTION CERTIFICATION ORDERS.
(a) In General- Section 1292(a) is amended by inserting after paragraph (3)
the following:
`(4) Orders of the district courts of the United States granting or denying
class certification under rule 23 of the Federal Rules of Civil Procedure,
if notice of appeal is filed within 10 days after entry of the order.'.
(b) Discovery Stay- All discovery and other proceedings shall be stayed during
the pendency of any appeal taken pursuant to the amendment made by subsection
(a), unless the court finds upon the motion of any party that specific discovery
is necessary to preserve evidence or to prevent undue prejudice to that party.
SEC. 7. EFFECTIVE DATE.
(a) In General- The amendments made by this Act shall apply to--
(1) any civil action commenced on or after the date of the enactment of
this Act; and
(2) any civil action commenced before such date of enactment in which a
class certification order (as defined in section 1332(d)(1)(C) of title
28, United States Code, as amended by section 4 of this Act) is entered
on or after such date of enactment.
(b) Filing of Notice of Removal- In the case of any civil action to which
subsection (a)(2) applies, the requirement relating to the 30-day period for
the filing of a notice of removal under section 1446(b) and section 1453(d)
of title 28, United States Code, shall be met if the notice of removal is
filed within 30 days after the date on which the class certification order
referred to in subsection (a)(2) is entered.
END
